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Boeing agrees to pay $2.5 billion to settle fraud charges related to 737 Max crashes

Boeing-737 Max Winglet 3763499_640The Boeing Co. has entered into an agreement with the U.S. Department of Justice to resolve a criminal charge related to a conspiracy to defraud the Federal Aviation Administration’s Aircraft Evaluation Group in its evaluation of Boeing’s 737 MAX airplane.

Boeing entered into a deferred prosecution agreement or DPA in connection with a criminal charging document filed Thursday. The document charges the company with one count of conspiracy to defraud the United States.

Under the DPA, Boeing will pay more than $2.5 billion – a criminal penalty of $243.6 million, payments to Boeing’s 737 MAX airline customers of $1.77 billion, and the establishment of a $500 million crash-victim beneficiaries fund. The fund will compensate the heirs, relatives, and legal beneficiaries of the 346 passengers who died in the Boeing 737 MAX crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302.

The two tragic crashes exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers, said Acting Assistant Attorney General David P. Burns of the Justice Department’s Criminal Division.

“Boeing’s employees chose the path of profit over candor by concealing material information from the FAA concerning the operation of its 737 Max airplane and engaging in an effort to cover up their deception,” said Burns.

The settlement holds Boeing accountable for its employees’ criminal misconduct, addresses the financial impact to Boeing’s airline customers, and provides some compensation to the crash-victims’ families and beneficiaries, he said.

As Boeing admitted in court documents, the company – through two of its 737 MAX flight technical pilots – deceived the FAA AEG about an aircraft part called the maneuvering characteristics augmentation system or MCAS, which impacted the flight control system.

Court documents describe Boeing’s deception as follows:

Because of Boeing’s deception, a key document published by the FAA AEG lacked information about MCAS, and, as a result, airplane manuals and pilot-training materials for U.S.-based airlines lacked it, too.

Boeing began developing and marketing the 737 MAX in 2011. Before any U.S.-based airline could operate the new 737 MAX, U.S. regulations required the FAA to evaluate and approve the airplane for commercial use.

As part of this process, the FAA AEG was responsible for determining the minimum level of pilot training required for a pilot to fly the 737 MAX for a U.S.-based airline. It looked at the differences between the 737 MAX and the prior version of Boeing’s 737 airplane, the 737 Next Generation.

At the end of this evaluation, the FAA AEG published the 737 MAX Flight Standardization Board Report, which contained information about certain aircraft parts and systems that Boeing was required to incorporate into airplane manuals and pilot-training materials for all U.S.-based airlines. The 737 MAX report also contained the FAA AEG’s differences-training determination.
After the report was published, Boeing’s airline customers were permitted to fly the 737 MAX.

In 2016, two of Boeing’s 737 MAX flight technical pilots discovered information about an important change to MCAS. Rather than sharing information about this change with the FAA AEG, Boeing, through the two pilots, concealed this information and deceived the agency about MCAS.

Because of this deceit, the FAA AEG deleted all information about MCAS from the final version of the 737 MAX report published in July 2017. As a result, airplane manuals and pilot training materials for U.S.-based airlines lacked information about MCAS, and pilots flying the 737 MAX for Boeing’s airline customers weren’t provided any information about MCAS in their manuals and training materials.

On Oct. 29, 2018, Lion Air Flight 610, a Boeing 737 MAX, crashed shortly after takeoff into the Java Sea near Indonesia. All 189 passengers and crew on board died. Following the Lion Air crash, the FAA AEG learned that MCAS activated during the flight and may have played a role in the crash.

The FAA AEG also learned for the first time about the change to MCAS, including the information about MCAS that Boeing concealed from the agency. Meanwhile, while investigations into the Lion Air crash continued, the two pilots continued misleading others –including officials at Boeing and the FAA – about their prior knowledge of the change to MCAS.

On March 10, 2019, Ethiopian Airlines Flight 302, a Boeing 737 MAX, crashed shortly after takeoff near Ejere, Ethiopia. All 157 passengers and crew on board died.

Following the Ethiopian Airlines crash, the FAA AEG learned that MCAS activated during the flight and may have played a role in the crash.

On March 13, 2019, the 737 MAX was officially grounded in the U.S., indefinitely halting further flights of this airplane by any U.S.-based airline.

Under the settlement, Boeing has agreed to continue to cooperate with the Fraud Section in any ongoing or future investigations and prosecutions.

As part of its cooperation, Boeing is required to report any evidence or allegation of a violation of U.S. fraud laws committed by Boeing’s employees or agents.

In addition, Boeing has agreed to strengthen its compliance program and to enhanced compliance program reporting requirements.

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